By Nigel Hunt

LONDON, (Reuters) – Soybean oil prices soared record-high Friday after Indonesia banned exports of palm oils. This raised concerns over the global shortage of other vegetable oils.

Already, the sharp increase in vegetable oil prices has been triggered by the loss of oil shipments from Ukraine (the world’s largest supplier of sunflower oil) and the drought in Argentina, which is the top exporter of soybean oil.

Tightening vegetable oil stocks comes as COVID-19 regulations are being relaxed. This has sparked an increase in the demand for food products and biofuels. Industry sources say that while oilseed crushers announced plans for expanding processing capacity, the majority of these new facilities won’t be available online for at most one year.

On Friday, soybean oil prices rose to a high of 83.21c per lb at the Chicago Board of Trade. That was a 4.5% increase and an unprecedented record. However, they fell back to 81.42 on Friday — still a record-breaking futures contract. The prices have risen almost half a percent so far in this year.

To combat rising prices, Indonesia, world’s largest palm oil producer and exporter, has blocked all exports since April 28. It is possible that this move will fuel food inflation in other countries.

Siegfried Falk from Hamburg-based Oil World said, “This is bad news to vegetable oil consumers, in many countries that currently heavily depend on palm oil due to shortages in sunflower, rapeseed and soy oils.”

Following Russia’s invasion in Ukraine (a key exporter of wheat, corn and sunflower oil), food inflation has been a serious concern across the globe.

An earlier report by the United Nations Food Agency stated that March saw a record-breaking 13% increase in food prices.

Argentina is the top-ranked supplier of soy oil in the world, ahead of Brazil, before temporarily suspending overseas sales. Then, in an effort to curb domestic food inflation, they increased the export tax rate.

According to the U.S. Agriculture Department, this record amount of soy beans will be processed by U.S. soybean crushers in 2015, an increase of 3.5% over last year.

Tom Hammer, National Oilseed Processors Association chief executive officer said that it is difficult to expand this capability until new facilities are built. A further 10-12 new soybean processors will also be available in the United States by 2025. In fact, the first of these is scheduled to open in 2023.

Hammer stated that “Ultimately, there will be more capacity (but we still have a long way to go”)

The most commonly used vegetable oil in the world is palm oil. It is used to make many products, including margarine and chocolate.